A Reminder on New Hire Reporting in New Hampshire: Certain Independent Contractors Are Covered

Most employers are likely familiar with the “new hire” reporting law in New Hampshire.  However, a recent inquiry brought to my attention an aspect of the law that I suspect is not well understood by many employers, namely that under this law employers are also required to report independent contractors as new hires if such contractors meet a specific financial threshold.

The new hire reporting law is administered by the New Hampshire Employment Security agency (NHES).  The law was an outgrowth of welfare reform legislation.  Once new hires are reported to NHES, the agency matches the information provided against state and national data related to persons who have not paid child support.  This allows the relevant child support collection agencies to locate and potentially collect unpaid support.

An “employer,” for purposes of the new hire reporting requirement, is defined as the same as that for federal income tax purposes, and includes, among other things, any “employing unit” under the state’s unemployment compensation law.

Given that definition, one might expect that the only persons who would be required to be reported are those defined as “employees.”  After all, only employees, or, more precisely, only those persons found to be “in employment” under the applicable provisions of the unemployment compensation laws, are potentially entitled to obtain unemployment compensation benefits.

But such an expectation would be wrong.  The new hire reporting law expressly states that the engagement of an independent contractor in the state triggers new hire reporting if:

• The independent contractor is an individual operating a business as a sole proprietorship; and
• The work is not “casual labor;” and
• Payment for the services rendered “is anticipated to exceed $2,500.”

Guidance issued by NHES states that the $2,500 threshold is triggered if the employer expects to pay the individual more than $2,500 for services for one or more contracts in a calendar year’s time, regardless of the amount of time the contract covers.  And the law provides that even if the payment for the services is not anticipated to exceed $2,500, if the payment does, in fact, exceed that amount in a calendar year, a report is required.  The independent contractor is to be reported within 20 days of the triggering of the reportable event.

In short, although the typical issue, in the HR law arena, is whether an individual is properly classified as an “employee” or an “independent contractor” for various purposes (such as federal income tax withholding and coverage by state workers’ compensation and unemployment compensation laws), for new hire reporting purposes the classification makes no difference – whether an employee or independent contractor (meeting the applicable financial threshold), the individual is to be reported.

About the Author: Steven L. Winer

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